Liberalization and regulation of telecommunications: Some observations on the UK experience

Abstract

This paper reviews the liberalization of the telecommunications sector in the UK during the last decade. The background to the UK's BT/Mercury ‘duopoly’, and subsequent market developments are discussed. This is followed by a brief summary of the new liberalization measures of the 1991 White Paper. While new players may now enter the UK market, the underlining economies of the industry will limit the effectiveness of new competition, most particularly in the local network. As a result continued regulation will be required to control the possibility of monopoly abuses by the dominant market player. Though the price capping approach adopted in the UK has some attractive features, the need to monitor cross-subsidies and identify appropriate interconnect terms means that extensive data on operating costs is needed by regulators. Separation of local and trunk networks may be advantageous.